Looking to Strike Oil at Any Moment

As an oil pioneer in Mexico, Sir Weetman Pearson's career could not have contrasted more starkly to that of Doheny. Pearson had no previous experience in the oil business at all. As grandson of the founder of a modest British construction firm, S. Pearson and Sons, young Weetman grew up in comfortable circumstances.^[105] He attended a public boarding school but eschewed training in engineering and the sciences at Oxford or Cambridge. Instead, Pearson entered his grandfather's firm. His family believed that sons should "learn their business in the business," as the saying went. By the age of twenty-three, Pearson had become a partner and was managing the construction of the main drainage system at Ipswich and a dock at King's Lynn. Pearson moved the firm to London in 1879 and competed for construction contracts throughout the world: docks and harbors in Egypt and Canada, rail lines in Spain, and the Hudson Tunnel in New York City. Taking over construction from less capable companies became Sir Weetman's specialty. He tried to save the Hudson Tunnel project by introducing the Greathead shield, complete with hydraulic jacks and segment erectors, to protect men and equipment from cave-ins during digging. He also engineered a recompression chamber that prevented workers from getting the bends as they emerged from their subterranean work. Pearson's company already had an international reputation in engineering before he came to Mexico.

Porfirio Diaz himself was responsible for bringing Sir Weetman to Mexico, where the Englishman proved himself a worthy champion. In 1889, the Mexican president sent emissaries to New York in an effort to interest the famous engineer in salvaging Mexico's Grand Canal.^[106] An American firm had floundered in attempting to construct the Mexico City drainage system, abandoning the poorly placed capital city to its centuries-old problem of flooding. Pearson drove a hard bargain, obtaining in negotiations with Diaz much autonomy in the work. To complete the twenty-nine-mile-long Grand Canal, Pearson brought in giant steam-powered dredgers from the German firm of Lobnitz, whose equipment had widened the Suez Canal. For most of the financing of the drainage project, Pearson depended on his partner, the Mexican government, which at the time enjoyed budget surpluses and quantities of silver provided by the American mining companies.

Díaz's administration had an impeccable rating in European credit markets. Mexico was one of the few countries to be able to borrow at the preferential rate of 5 percent, and after 1905 at 4.5 percent. Pearson also had independent sources of capital. His company at any one time had contracts worth from £5 million to £10 million, and London bankers and the stock market provided Pearson additional capital.^[107] Pearson thus was able to buy the forty-one-mile-long Veracruz-to-Alvarado railway and build and operate various Mexican tramworks and utility companies. His connections in England were impeccable. The wealthy businessman in 1895 had won a seat in the House of Commons, where he was known as "the Member for Mexico."

Indeed, success with the Grand Canal also earned Pearson an unassailable reputation in Mexico. The president personally made contacts with Pearson, and Pearson's direct link to Díaz — he entertained Porfirio Díaz, Jr., on the son's tour of Europe and England — also insulated the British engineer from having to submit to the corruption of the bureaucrats surrounding the Mexican president, Díaz willingly used the British engineer as a foil to the Americans, who already dominated the smelting and railway businesses. Pearson was the logical choice to construct the modern harbor and port at Veracruz. He also hired American medical technology and built a new water and sewage system to control the perennial scourges of el vómito negro (yellow fever), malaria, and cholera. Sir Weetman, the world's foremost engineering contractor, had won the implicit admiration of a Mexican president suspicious of Americans.^[108] As a foreigner and British gentleman, Pearson may also have been politically more trustworthy to Díaz even than most Mexican businessmen.

In the meanwhile, the Tehuantepec railway was turning out badly. Díaz had given the concession to another British firm in order to break the American-owned Panamanian Railroad's monopoly of transisthmian transport. Once completed, however, the 190-mile line was plagued with frequent breakdowns, roadbed washouts, insufficient port capacities, and undersized rail cars.^[109] Díaz summoned Pearson to the rescue. The Díaz government provided the capital, often paying Pearson in silver bars. But the British company retained managerial control. Once completed, the company would operate the entire complex as managing partner, sharing with the government one-half the loss and one-third the profit. Finance Minister Limantour, who had been in Europe when the Tehuantepec contract was signed, criticized the liberal terms and autonomy given to the foreign capitalist. But Díaz

supported Pearson. Nevertheless, a second contract, renegotiated in 1902, tightened the restrictions. Article 106 of that contract stipulated that after seven years, Pearson had the right to transfer his contract to another company, which could be organized in Mexico, Great Britain, France, Belgium, or Germany — but not the United States.^[110] Sir Weetman benefited from anti-American political sentiments.

By now, Pearson had an experienced staff in Mexico. J. B. Body had served as assistant manager of the Grand Canal and was chief of the Veracruz harbor construction. Since 1889, he had come to speak fluent Spanish, often translating at meetings between Díaz and Pearson. Body took charge of rebuilding the transportation complex. Pearson's isthmian project involved survey and construction of a new roadbed through the lowlands of Tehuantepec, flood control, extensive bridging, breakwaters and docks at the Pacific terminus of Salina Cruz, and dredging and dockwork at the gulf terminus of Coatzacoalcos. The latter river port was rechristened as Puerto México. Body supervised the work of two thousand to five thousand Mexican workers recruited from the highlands and provided with housing, medical care, and food. J. N. Galbraith, the new general manager of the Tehuantepec National Railroad, estimated that about twenty-four trains a day would pass over the two-hundred-mile route. When he inaugurated the Tehuantepec complex with a train ride in 1907, Díaz was effusive in his praise. "Portions of the Isthmus have been literally remade," the Mexican president said.^[111] "Flourishing new towns with pretty and comfortable houses and contented inhabitants owe their existence to the energy and courage of Sir Weetman Pearson, whose name will endure and be held in honour in this historic region of Mexico, long after the rails on which our party has glided so smoothly have become eroded by age."

Sir Weetman was no less effusive in his praise of Diaz. In his speech, Pearson said, "It was only owing to great hardships and personal sacrifices, ungrudgingly made, the exercise of unvarying patience and the determination and courage which have had for their inspiration the glorious example furnished by the career of General Díaz that the results you have seen and are to see have been arrived at." He had good reason to thank Diaz. The Mexican government had provided up to 85 million pesos to complete the Tehuantepec project.^[112] Pearson owed his success in Mexico to his worldwide business experience, his access to the engineering technology of the day, his financial resources among London bankers, and the capital and patronage of President Díaz. All these factors enabled S. Pearson and Sons, engineers and contractors,

Fig. 3.
Lord Cowdray (formerly Sir Weetman Pearson), c. 1915. in Great Britain's
House of Lords, he was known as the "Member for Mexico" because of his
varied business interests in that country, including the Compañía Mexicana de
Petróleo El Aguila. from the Pearson Photograph Collection, British Science
Museum Library, London, courtesy of Pearson PLC.

to become oilmen as well. All except one: Díaz provided no capital for oil projects. His government would help Pearson in other tangible ways.

Pearson's decision to exploit Mexico's oil resources, although it proved sound from a business standpoint, had come to him in a roundabout fashion. Body had come upon tar pools at San Cristóbal and mentioned them to Pearson as another oddity of the tropical environment. Later, in 1901, as he was traveling by train between Mexico and New York, Pearson stopped over in Laredo, Texas. Lucas had just brought in the oil strike at Spindletop. Everyone on the Texas Gulf Coast was in the grip of "oil fever." Pearson made inquiries about this new oil business, spending time in San Antonio as well. He learned that prospectors had been attracted to Spindletop by the occurrence of tar pools. Pearson immediately wired Body to "secure option not only on oil land, but all land for miles round" in the Isthmus of Tehuantepec. Pearson added, "move sharply, and be sure that we are dealing with principals."^[113] By the end of 1901, he had men exploring the isthmus and in Tabasco. They began immediately to buy and lease land. Pearson's general manager in Mexico City, J.B. Body, gained an education — like Doheny and Pearson themselves — on the job. He negotiated for purchase of numerous large estates in the isthmus, rejecting some after a "visual look for prospects" and buying others for as little as 6,000 pesos. He took out leases with important elite families such as that of the Rubio Romero in-laws of President Díaz. Doña Carmen Rubio de Díaz, in fact, became lessor to Pearson on contracts that provided for royalties of two to five centavos per barrel [of 150 liters] of crude produced in the San Cristóbal fields. By 1903, his Mexican managers were moving drilling equipment from the Veracruz docks to the isthmian oil properties.^[114]

At the same time that work progressed on the transisthmian project, Pearson's agents in Mexico also assembled an experienced team to make their Mexican oil properties productive. Body hired Thomas Ryder away from Waters-Pierce and engaged drillers who had worked for Doheny at El Ebano. Pearson had even traveled to Washington, D.C., to hire Capt. Anthony F. Lucas, discoverer of Spindletop and later called the first petroleum engineer. Lucas spent two years as a consultant, investigating Pearson's isthmian properties. After an exhaustive survey, he recommended drilling at Jaltipan, San Cristóbal, Los Tigres, and El Chango. Lucas spoke enthusiastically of their prospects on the isthmus. In the conclusion of one report, he considered that his client

would soon be able "to change oil for coal on all of your locomotives, dredges on both oceans, and any motive power, with perhaps plenty to spare not only for refining and for the Republic's consumption, but for the export trade as well."^[115] A heady appraisal. Unfortunately, of the sites Lucas investigated, only San Cristóbal ever yielded oil in commercial quantities. In time, however, other oil fields outside of the isthmus would fulfill Lucas's prophecy.

Early work did not prove at all promising. Many wells blew out gas, mud, and water but little in the way of crude petroleum. The first Tabasco wells produced oil in such insufficient quantities that the Pearson managers used it in its crude state as fuel oil; it did not warrant expensive refining. Yet the expectations remained high. Those wells that did produce yielded a high grade of crude suitable for fuel oil, lubricants, illuminants, and naphtha. Body, therefore, expressed confidence, as in this account in 1905 of a trip to the isthmian fields:

Ryder has just returned from the Lucas field, and he tells me that No 3 started to gas just before he arrived there, and to such an extent that they were not able to get anywhere near the well, and that they heard the noise whilst on the river when approaching San Cristobal landing. Yesterday morning the gas subsided, and they recommenced drilling, but only to break through into another big gas pocket, and they are still stopped from working. The drillers are looking to strike oil at any moment, after they resume operations. Ryder tells me this gas was coming out with terrific force, carrying mud and water with it several hundred feet in the air.^[116]

Body's letter represented greater expectations than, in fact, the foreign interests were ever to realize in southern Veracruz, Tabasco, and Campeche, where the Pearson group owned 600,000 acres of oil lands and leased an additional 300,000 acres. The Lucas well soon played out. Despite Pearson's financial ability to hire the best managerial talent, drilling expertise, and legal and political minds available in Mexico, his company was incapable of opening up the area that in the mid-1970s would become the prolific Reforma oil fields. They could not drill deep enough. Rotary tools in 1905 seldom penetrated three thousand feet below the surface. Drillers for Petróleos Mexicanos (Pemex, the national oil company of Mexico) in the 1970s perforated on and offshore to thirty thousand feet.^[117] Had they lived long enough, Pearson and Body might have been gratified that their initial optimism was borne out. Back in 1905, however, the geology confounded them.

Gambling that the slight production of the isthmus would soon increase, the Pearson interests undertook to construct a refinery at Mi-

natitlán. At the time, Minatitlán was just a small commercial town of four thousand persons forty kilometers inland on the Coatzacoalcos River. In 1905, the Pearson group laid a pipeline from the San Cristóbal oil field to the new refinery at the same time that it brought the 3,000-bd facility on line. Obtaining experienced refinery personnel, not merely good mechanics, proved to be a more difficult problem than acquiring good drilling crews. Waters-Pierce had always relied upon the expertise of Standard Oil. Pearson acquired at least some of the technology and expertise of Standard Oil by hiring Thomas Ryder and other managers from Waters-Pierce. Otherwise, Pearson had to settle for businessmen of no special oil experience. John Purdy, a long-time railroad contractor and shipping manager for Pearson, helped build the Minatitlán Refinery.^[118] Then Pearson proceeded to make a contract with Bowrings and Company, a marketing company, for the distribution of Mexican oil products throughout Great Britain. Pearson's confidence tended to get ahead of both his Mexican production and his ability to refine it. In 1908, a fire shut down the Minatitlán plant, providing Pearson the opportunity to correct certain processes and improve the quality of the product.^[119] Ultimately, Pearson wanted to enlarge the refinery to a capacity of 40,000 bd, supply fuel oil to the Mexican railways, and export to Great Britain.

Yet up to 1908, the British businessman was still losing money. Pearson sank £5 million of his own capital in the oil venture. The Díaz government did not become his financial partner as it had for the Grand Canal, ports, and railway. Optimistically, Body expected to be able to make at least £5,000 a month selling fuel oil to the railways but admitted that such sales were not yet possible. He did not have the product. Construction of the refinery had been expensive. By 1907, Body had already overseen the expenditure of 630,000 pesos for American machinery, dock- and brick-works, machine shops, power station, warehouse, pipelines, staff housing, and a hospital.^[120] If he was going to stay in the petroleum business, Pearson had to make some sales and make them soon. Of course, that was something he could not do until he had crude oil.

Pearson, nevertheless, pressed forward in the oil business. The Minatitlán refinery commenced operation in March 1908 and in August, the first shipment of refined oil departed via tanker to England. By that time, a pipeline had been completed to Pearson's newly constructed oil terminal at Puerto México, alias Coatzacoalcos. But Pearson was not yet exporting Mexican petroleum. Poor production results on the

isthmus motivated the Pearson group to purchase 400,000 barrels of crude oil from Texas.^[121] Thus far, Pearson was not very different from Waters-Pierce — he was refining imported oil — except that Pearson had more political friends in the Díaz regime.

Sir Weetman Pearson, by dint of long engineering service to the Mexican government, had come to practice a sort of business diplomacy meant to create a favorable climate for his enterprise. In order to keep from appearing to be overrun by the Americans, Mexican politicians found much political expedience in supporting British interests. The government encouraged all foreign capital but Pearson's in particular. In fact, Secretary Limantour complained constantly that the government concessions were far too favorable to the British engineer. Pearson defended the generosity. "Unless special facilities had been given by the Government and subventions," Pearson wrote later, "no railways in Mexico could have been constructed."^[122]

The British engineer continued to solidify his friendships in Mexico through favors and gifts. When he came to visit, Pearson brought valuable European objets d'art for Secretary Limantour's home; he lent Emilio Velasco 20,000 pesos so that he could purchase a house; and Body made his home in Veracruz available to traveling notables like the Rubio Romero family. Díaz himself stayed at Body's home at the Mexican port before boarding a German liner for exile in 1911. Lady Annie Cass Pearson established a well-appointed home in Mexico City in a colonial mansion that had once been the British legation, giving large parties for Mexican society. The Pearsons donated £100,000 to found the Cowdray Hospital. Pearson considered it expedient to "lean over backwards" to favor the Mexicans in all his dealings with them.^[123]

To counter a bad press in some Mexican newspapers, Body used company funds to advertise, to print the company's views on certain issues, and to gain the cooperation of newsmen. Body was also careful to apprise President Díaz personally of all his company's activities. During the depression of 1905, when a flare-up of nationalism motivated the Academy of Jurisprudence to criticize the proposed oil law of 1905 as being too liberal and unrestricted, President Díaz himself calmed Body. The president personally assured him, Body reported, that the Pearson group could "devote a lot more time to the direct work of the fields, instead of spending so much time and worry on legal matters and titles to protect ourselves in and around our fields of exploitation."^[124] While Díaz remained in charge, the British and other oilmen too were able to concentrate on business.

Pearson's close relations with members of the Díaz regime paid a large dividend in 1906, when the engineering company received the biggest government oil concession to date. The fifty-year contract, which did not challenge the existing mining laws nor invalidate any contracts between oilmen and private landholders, covered all national land, lakes, and lagoons in the state of Veracruz. The national government was to receive a royalty of 7 percent of all production. Veracruz state obtained a royalty of 3 percent. In return, the government granted the company duty-free import of machinery and free export of oil found on subject lands. One final obligation existed: the oil company was to be incorporated in Mexico, not abroad.^[125] None of the concessionary lands were to yield any major oil discovery. Once Díaz left power, nonetheless, succeeding Mexican governments were to repudiate this generous oil concession.

Such political influence contained its own limitations and dangers to Pearson. Secretary of Finance Limantour proved a difficult man for the Pearson interests to control. While he vowed to assist Pearson against competition from Standard Oil, the nemesis of all the Mexicans, Limantour was careful to collect all taxes due the government. Occasionally, this meant taxing domestic petroleum twice, once when Pearson brought Tabasco crude oil destined for the refinery into Puerto México and then again when the refinery shipped the refined product out again.^[126] Despite occasional toughness, government favoritism toward Pearson's oil interests gained many political enemies, as will be seen. Americans resented the "conspiracy" between Díaz and Pearson, whereas Mexicans who opposed the Díaz regime also came to resent the Pearson connection.^[127] To the extent that capital investment was a political act in Mexico, foreign capitalists became involved in domestic politics — whether intentionally or not.